hey everyone and welcome back to the channel today we're exploring the four major Market structures perfect competition monopolistic competition oligopolies and monopolies with that said let's get into [Music] it so first up we're going to look at perfect competition so picture a vibrant Farmers Market where dozens of vendors are selling identical apples in a perfectly competitive market many buyers and sellers exist and no single vendor can set the prices that is if a single vendor changes their prices the market really isn't impacted on the other hand if a single buyer changes their willingness to pay the market isn't really impacted either every individual's decisions and preferences are like a drop of water in the ocean a market like this relies on supply and demand now there's three key features that you need to keep in mind about perfect competition first they're homogeneous products and what this means is that the products are absolutely identical there's no differentiation between one vendor's products and another's second is that there's many buyers and sellers and particularly no single entity no buyer or seller can influence the market price finally there's free entry and exit in this market so firms can easily enter or exit the market and there aren't really any steep barriers to entry to help further grasp this concept let's take a look at a couple of real life examples of perfect competition the first is Agricultural Product so think of markets for staple crops like wheat or corn numerous Farmers produce either identical or extremely similar products and the prices are determined by supply and demand next we've got stock markets while this might not be a perfect competition stocks of companies can exhibit characteristics of the perfect competition where many buyers and sellers trade shares influencing the price through Collective actions but no individual's actions bear any weight on its own finally we've got something like fish markets and fresh fish markets often have multiple vendors selling the exact same type of fish leading to competitive pricing based on availability and quality next we have monopolistic competition imagine a neighborhood filled with coffee shops each offering Unique Blends and atmosphere in this structure firms have some pricing power due to product differentiation so the key features in this type of Market are as follows one differentiated products so each firm offers a product that is just slightly different from a different firm next we have many sellers so numerous firms or sellers exist but they compete based on their brand and their quality because their goods are technically a little bit different and finally there's free entry and exit which means there's low or no barriers to entry which means we can allow new firms to enter the market which is how we keep the number of firms very high now let's look at some real world examples to wrap our head around it a little bit better the first example is fast food chains companies like McDonald's Burger King Wendy's well they all serve burgers and other fast food things that are very similar but they differentiate themselves through branding and some unique menu items the second example is clothing brands such as Gap Old Navy and H&M which offer similar apparel but they target different customer segments based on their Styles and their pricing finally we have something like local restaurants so you can think of the variety of pizza places in your city each one offers slightly different toppings or cross Styles or dining experiences which allows them to attract different customer bases even though their products are almost the same they're just barely differentiated the next Market structure we're going to talk about is the oligopoly so think of an airline industry where just a handful of carriers control most of the market in an olop a small number of firms dominate leading to strategic interactions among them when it comes to pricing strategies and they have their own set of key features first there's only a few dominant firms so a limited number of companies hold significant market share in an industry the second key feature is interdependence each firm's pricing and output decisions depend on their competitors so they all must communicate with each other to know the optimal settings finally there's a potential for collusion So speaking of that firms may work together to set prices or to limit output so they can keep their margins and their profits High let's take a look at a couple of real world examples starting with Airlines major players like Delta American Airlines and Southwest dominate the market often responding to each other's pricing and Route decisions next we have something like telecommunications so there's companies like AT&T Verizon and T-Mobile which control a significant share in the market in the US and for Canada that would be Rogers and Bell but nonetheless they influence pricing and service plans based on their competitor's moves and finally we have this last one which maybe you could consider monopolistic competition it depends on how you look at it but I'm going to say automobile manufacturers so back in the day we just had the big North Amer American companies competing in a concentrated Market again this was especially notable in North America and they often engaged in promotional pricing and new product launches to attract customers now as more Brands gain popularization this particular example can look more and more like a monopolistic competition than an oligopoly but it started out as a very strong oligopoly finally we have the final Market structure which is a monopoly think of your local water utility as the only provider in the area in a monopoly one company controls the entire Market often due to high barriers of Entry that prevent others from entering the market this barrier can be a variety of things such as being too expensive to start or not having proprietary technology or licensing or something along those lines now the key features for a monopoly are as follows a single seller that is one firm dominates the market second it's a unique product so there's absolutely no close substitutes available in the market and then finally High barriers to entry so there's significant obstacles that prevent competition from being introduced to this Monopoly so let's take a look at a couple of examples first we've got utility companies so many regions have a single provider for essential services like water or electricity such as specific Gas and Electric in California or maybe Enbridge Gas in Ontario leading to regulated pricing second we've got local cable providers so in many areas only one cable company offers cable services like Comcast or Rogers in certain regions limiting consumers choices and pricing power finally we have patented Pharmaceuticals so this is when a drug is patented so only one pharmaceutical company holds the patent for this when a drug is patented the pharmaceutical company that holds the patent has a monopoly until that patent expires which in some instances can be a long time this means they're the only one legally allowed to create and distribute this particular drug which is well a monopoly and there you have it the four major Market structures perfect competition monopolistic competition an oligopoly and a monopoly each one plays a vital role in shaping our economy now understanding these Concepts can help us make better decisions as consumers and citizens we hope that you found this video helpful and if you did let us know by liking the video subscribing to the channel of course let us know what economic topics or homework questions you'd like to see us cover in the future thanks for watching this video and we'll catch you in the next [Music]